CPUC leaves SCE’s fiber business intact, but the beatings will continue

With barely a mention at its meeting, the California Public Utilities Commission closed the first chapter of a saga that should never have been written. By a unanimous vote, commissioners allowed Southern California Edison to withdraw its request for blanket approval of a dark fiber lease deal with Verizon.

SCE asked to pull the application because the deal was dead, the victim of a mauling by so called consumer advocates and a purblind proposed decision by CPUC commissioner Clifford Rechtschaffen. Opponents objected, preferring instead that the commission press on and dismantle a revenue sharing deal, dating back two decades, that gave 10% of SCE’s fiber revenue to electric customers.

The fiber network was originally built to support its electric operations, but consistent with industry practice and common sense, SCE installed more fiber strands than it immediately needed – the cost of a cable with extra strands is diminishingly small. Construction accounts for almost all the expense.

Independent dark fiber is a valuable resource, particularly for competitive telecoms companies, and large corporate and institutional users, but also for incumbents like Verizon. It’s particularly precious in California, where most of the long haul fiber routes are controlled by old school, monopoly model telephone companies.

So SCE found a ready market for its 5,000 miles of fiber, threaded throughout the greater Los Angeles region. But success draws attention, in this case from groups that claim to speak for Californian consumers, but don’t seem to understand that those consumers need fast and, particularly, affordable broadband service, too. They convinced Rechtschaffen to propose taking half of SCE’s fiber revenue away, which would effectively kill the business. After paying operating costs – a fiber business does not run for free – SCE would have been either in the red or close enough to it that there would be little point to continuing.

After the case dragged on for more than a year, Verizon threw up its hands and cancelled the contract. SCE told the CPUC it was all moot, and on Thursday commissioners rejected opposing arguments and agreed. But the decision also contained a warning: the commission has electric company fiber in its crosshairs…

The scope of the proceeding has raised broad policy issues that include identifying what policy frameworks promote the most effective utilization of ratepayer- funded dark fiber throughout California’s regulated electric utility infrastructure and assure safety, universal access to utility services, and non-discriminatory access to this infrastructure, especially amidst policy changes at the federal level. The Commission may consider opening a rulemaking to consider these and other broad policy issues and, in that broader context, reconsider the appropriate revenue sharing allocation for dark fiber route leases.

It’s not just about SCE. Apparently seeing the writing on the wall, PG&E also backed off a plan to become a fully certified telecoms company. Dark fiber sales is a minor sideline for both companies. Adding hugely disproportionate regulatory overhead will do nothing for electric rates and only serve to reduce competition and increase broadband prices for all consumers.